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Legislative Assembly for the ACT: 2008 Week 01 Hansard (Tuesday, 12 February 2008) . . Page.. 15 ..

department officials that they expect this to lead to reductions in legal costs. I am satisfied that this bill provides a clear procedure for the settlement of insurance claims that will allow insurers greater certainty. This will hopefully be of sufficient attraction to entice more insurers into the ACT market and ultimately establish greater competition. This, of course, will be a benefit to the community at large.

In addition to the costs of delays, legal costs make up a large proportion of the costs of settling insurance claims in the ACT. I am informed by the Department of Treasury that legal fees make up approximately 20 per cent of the cost of the CTP scheme in the ACT. This is double the national average. The procedural provisions in this bill will hopefully alleviate this problem by providing greater certainty to all parties on the procedure for claims. This should lead to less dispute and less time spent on legal work.

Clause 149 of the bill also imposes rules on the recovery of legal costs. For awards of less than $30,000 in damages, excluding pain and suffering, costs are awarded to the claimant only if the amount awarded equals or exceeds the claimant’s mandatory final offer. Costs are awarded to the respondent only if the award is equal to or less than the insurer’s mandatory final offer. These costs will be prescribed by regulation. For awards between $30,000 and $50,000, costs are capped at $2,500 for costs up to the date of proceedings, plus indemnity for costs on or after the date of proceedings. This amount can be altered by regulation. This is intended to ensure that legal costs prior to proceedings are reduced by ensuring that they are recoverable only up to a certain point.

I have to put on the record that I have some reservations about these attempts to cap legal costs at less than an indemnity basis. While it is clear that legal costs are high in this area, I am a little bit worried about the consequences that could arise from these provisions.

A possible scenario is that a client will instruct a lawyer to push ahead with a claim, an instruction that must be followed even if the lawyer believes that the result will not be favourable. Will the lawyer be able to recover costs from their client? Either the lawyer will miss out on legitimate fees or the client may be in a position where some of their payout can be recovered by their own legal team. This is a situation that will have to be monitored closely. It is possible that the amounts in this bill will have to be adjusted in the future, but for the time being I am willing to support these changes in the interests of overall reform in this area of insurance.

Another feature of this bill is that it provides for immediate payment to claimants for medical expenses of up to $5,000. This amount is paid by the insurer without any admission of liability on the part of the insurer. During briefings on this bill, I was informed that this will allow injured parties to begin rehabilitation immediately, thereby reducing overall medical costs. This certainly has the potential to save claimants from a great deal of pain and suffering, and it has the potential to save insurers from further costs. I am a little bit sceptical about forcibly imposing this situation by law. If it does indeed reduce costs to insurers, one does question the need to make it mandatory. To put it another way, the fact that this is made mandatory makes me question whether it will actually lead to reductions in costs for insurers.

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